The NFIB Small Business Optimism Index declined 0.2 points in August to 94.4, with owners refusing to expand, expecting worse business conditions and unable to fill open positions. The Index remains well below the 42-year average of 98.
Five of the 10 Index components posted a gain, four declined, and one remained unchanged. The outlook for business conditions in the next six months had the most dramatic change, dropping seven points. Setting an all-time high for the survey, 39 percent of business owners cited the political climate as a reason not to expand. Uncertainty about the economy and government policy also hit record highs among small business owners.
“Once again, the NFIB survey showed no signs of strength in the small business sector,” said NFIB Chief Economist Bill Dunkelberg. “Uncertainty seems to be the major enemy of economic progress and the political climate is a major contributor to the high levels of uncertainty that we’ve seen. The current economic environment is not a good one for strong or sustained growth.”
Reported job creation remained weak in August with the seasonally adjusted average employment change per firm posting a decline of -0.02 workers per firm. Fifty-six percent reported hiring or trying to hire (up 3 points), but 48 percent reported few or no qualified applicants for the positions they were trying to fill. Fifteen percent of owners cited the difficulty of finding qualified workers as their single most important business problem. This issue ranks third out of nine major issues listed behind taxes and the cost of regulation and red tape. Thirty percent of all owners reported job openings they could not fill in the current period, up 4 points and the highest reading in this recovery. Fifteen percent reported using temporary workers, up 2 points. A seasonally adjusted net 9 percent plan to create new jobs, down 3 points from July.
Fifty-seven percent reported capital outlays, down 2 points from July. The percentage of owners making an outlay peaked in July 2015 at 61 percent, revisiting that percentage in January but has faded since. The percent of owners planning capital outlays in the next 3 to 6 months rose 3 points to 28 percent. This is 1 point better than the recovery high reading reached in October 2014, but historically weak. The small business sector remains in “maintenance mode”. Seasonally adjusted, the net percent expecting better business conditions deteriorated 7 percentage points to a net negative 12 percent.
Inflationary pressures remain dormant on Main Street. Fourteen percent of owners reported reducing their average selling prices in the past three months (down 2 points), and 16 percent reported price increases (up 1 point). Seasonally adjusted, the net percent of owners raising selling prices rose 5 points from July to 3 percent, and a net 15 percent plan price hikes (up 1 point). Prospects for a resurgence of inflation are low, especially with gas prices on the decline again.
A seasonally adjusted net 24 percent of owners reported raising worker compensation, up 2 points from June but 2 points below May. The net percent planning to increase compensation rose 1 point to a net 15 percent.
